This paper empirically examines the theoretically ambivalent relationship between socially responsible investing (SRI) and stock performance. It contributes to the existing literature by considering both the US and the entire European stock markets and by using consistent world-wide corporate sustainability performance data. Our portfolio analysis from 1998 to 2009 is based on the common four-factor model according to Carhart (1997), which comprises market return, size, value, and momentum factors. We show for the US and the European stock markets that SRI is associated with large-sized firms. The insignificant abnormal stock returns for SRI in both regions are the main result of our paper. Therefore, our study supports the view that SRI stocks are correctly priced by market participants, although we cannot rule out that a corresponding mispricing has existed before the beginning of our observation period in 1998. AbstractThis paper empirically examines the theoretically ambivalent relationship between socially responsible investing (SRI) and stock performance. It contributes to the existing literature by considering both the US and the entire European stock markets and by using consistent world-wide corporate sustainability performance data. Our portfolio analysis from 1998 to 2009 is based on the common four-factor model according to Carhart (1997), which comprises market return, size, value, and momentum factors. We show for the US and the European stock markets that SRI is associated with large-sized firms. The main result of our paper are the insignificant abnormal stock returns for SRI in both regions. Therefore, our study supports the view that SRI stocks are correctly priced by market participants, although we cannot rule out that a corresponding mispricing has existed before the beginning of our observation period in 1998.
Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractEffective climate policy can be achieved by implementing either a global uniform carbon price or a global cap and trade system. But depending on the allocation of tax revenues and initial pollution permits, the instruments have very different wealth implications for the individual countries. The paper highlights the distributional effects of climate policies by calculating and comparing emission budget allocations under three different schemes that are in line with a 2• C warming target. We calculate implicit carbon budgets up to 2050 under a globally uniform CO 2 price, a design proposed by Weitzman (2014). We then compare the allocation with the budget derived from equity principles by Bretschger (2013) and with emission budgets under egalitarian emission rights as proposed by BASIC (2011). Our results show that implicit burden sharing across countries varies substantially with the different policy regimes. Wealthy countries with low energy prices tend to obtain the highest emission budget under a price scheme while poor low-emission countries receive the highest budget under egalitarian emission rights. The budget positions of India and the US are illustrative for the conflicting country interests. JEL-Classification: Q58, Q53
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